good pic

jonathankaplan


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...wherever you go, there you are...


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one way to save the economy, or at the least, the perception of it and the confidence in it.
good pic
jonathankaplan
During/After the 1987 Stock Market crash, Ronald Reagan and company did (at least) one thing that totally saved the situation. He and his cronies got on the phone and talked, twisted arms, whatever, but they got american listed companies to start announcing buybacks of their own stock.
Today, a great many US companies are awash in cash, but won't invest it because of the uncertainty. So, the cash sits in T-Bills at banks. And the financial institutions are much much less likely to lend it to anyone, cause it might cause them to have to adjust their balance sheets and take writedowns. So, the money sits there.
If even a couple dozen companies that have high cash levels announced stock buybacks, the stock market would get the confidence it needs. Obama is, all things considered, a rather pro-business president. He and his group should be on the phone right now. Or maybe they are planning it all for closer to the end of this year, so the length of the rise stretches through the 2012 election.
My, how cynical I have gotten as the decades go by.

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Completely agreed! I don't think of you being cynical about this. Sounds pretty spot on to me.

yeah, well the cynical part (that i wouldnt have thought of 25 years ago) is the timing re: the election. Also, i bet this hasnt happened cause Obama is getting too much advice that doing this will hurt the banks enough (by weakening their balance sheets) that it isnt worth doing at all. Personally, I think that is bull, the bank's balance sheets need serious restructuring anyway, and this is a mixed approach to making that happen that actually has a corollary benefit.
Thanks!...and good luck with Irene. I was in the Taj Mahal the last time a big hurricane blew through the Northeast (in the early 90's or so) and it was a GREAT time to be there....fish stuck in the aquarium.....lol.

I used to have a knack of being at the Taj whenever a Nor'Easter would hit and its quite a scene driving back on the White Horse Pike near the low lying areas with the high tide.

But yes you are right..the weekend NYC crowd that comes down for the weekend and gets rooms are a perfect source of degeneracy and cash flow in the poker room ;)

I also agree with you that Obama is getting terrible advice...Hard pressed to see what (if anything) will be done with the remainder of his administration.

Speaking of which, can wholly-owned foreign subsidiary of a U.S. company buy its own parent's stock?

You want to encourages stock buy-backs, allow companies to repatriate tax-free cash held in offshore subsidiaries for the purpose of stock buy-back.

i like that idea. I dont think it is allowed though, there are some cross-ownership rules for just that type of tax-avoidance.
Thanks!

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It's also a recognition that compensation dilutes the stock over time via options and outright grants to execs and buy-backs are a way to reverse that.

Right now, so many companies are signaling they dont have a better way to invest by storing the cash in t-bills. Stock buybacks are (at least) a way to get money out of the stingy banks and put it in people's hands to use. You are wrong about the positive signal thing. Stock buybacks have always been perceived as a sign of strength. As you point out, investment in the business itself would be preferred (much preferred) but stock buybacks at least use the money, and dont just store it in banks for other purposes. And who says they have to use all of it? Even the announcement itself would change the perception, and the buybacks (usually) occur slowly enough there is plenty of time to not go hog wild causing an upside panic.
Finally, you give stockholders of today way too much credit.
Thanks!

ORCL has been doing this for a while. They authorized $8 billion in 2008 and they've spent about half of it, per the last 10-K.

Also, is lack of confidence in the stock market really the root problem? Isn't the problem more that demand is still soft. I mean, the market is still up 50% from it's floor.

Yep, to all that. But the root problem isnt (yet) the issue. I think the current issue is lack of confidence, which is much more tied to perception than actual numbers. Change the perception now, the numbers will change (positively) later.
Thanks!

We can devalue the dollar to the point where they're forced to get rid of the cash, as fast as they can, all at once, in whatever way they can think of in a short amount of time.

It's ironic - they're sitting on piles of something that's about to become worthless.

And unlike you or me, they're too big to really hedge or move. It'll be interesting to see what happens when the public finally loses all confidence in the dollar, how will these megacorps react to it.

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